“The nation’s largest corporations posted one of their worst profit performances in at least 10 years in the first quarter, suggesting companies may cut spending further to stem the tide,” writes Steve Liesman in today’s Wall Street Journal.

“Net income for 1,433 of the 1,700 companies tracked each quarter by The Wall Street Journal declined 43% during the first three months of the year, falling to $58.5 billion from $102.1 billion a year ago. The first-quarter decline was far more severe than the 20% decline in the fourth quarter and represented a huge reversal from the first quarter of a year ago, when profits rose 21%. The latest data are from companies that reported first-quarter earnings as of Friday.”

“How’s your favorite company doing? See a breakdown of first-quarter net income by company and industry “It’s fairly clear that we are not only in a profits recession but that the risk is we may have actually teetered over into an output recession as the first quarter closed,” said John Ryding, an economist at Bear Stearns & Co.”

“The huge decline in profits was well anticipated and was attributed largely to rising labor and fuel costs, compounded by falling sales, in what economists describe as a classic profit squeeze. In addition, technology has made companies more reliant than ever on volume to keep unit costs down. As volume has slowed, unit costs have risen and eroded profitability.”

” ‘You’ve had a combination of higher energy prices, much slower nominal [gross domestic product] growth and declining productivity and rising compensation costs,’ said William Dudley, chief U.S. economist at Goldman, Sachs & Co. ‘Along with an investment boom that turned to bust, basically everything that could go wrong did.’ “

“The net-income figure includes all extraordinary items, write-downs and one-time charges. Operating income, which excludes write-offs and other one-time items, and is the favored performance figure by Wall Street analysts, fell just 6.5% per share for the Standard & Poor’s 500 companies, according to Thompson Financial/First Call.”

“But including the big write-downs that characterized first-quarter results puts the first quarter among the worst in a decade. By comparison, profits fell 34% in the fourth quarter of 1991 amid a recession.”

“Technology concerns’ big write-offs were a major part of the decline. Just 20 large companies were responsible for $32.5 billion of the $43.6 billion earnings fall in the first quarter of 2001; of those 20 corporations, 14 were from the technology and telecommunications sectors.”